Bells Chime In With Voice-Over-Net Hype

Suddenly, this month, it seems the Bells have finally discovered the revolutionary power of voice-over-the-Net.

In a rare concerted move that threatens to dramatically remake the industry landscape, big phone players BellSouth (BLS Quote), Verizon (VZ Quote), Qwest (Q Quote) and SBC (SBC Quote) have unleashed a bone-jarring salvo of press releases heralding their plans to enter the 6-year-old business of voice-over-Internet protocol, or VoIP.

Yes, this staggering strategic shift was largely contained to some small and medium-sized business offerings by BellSouth and SBC and, in Qwest's case, a "select group of customers in Minnesota." Still, to growth-hungry investors, it was validation of a theme they've been keen on for a good part of the year.

Despite the hoopla, some industry observers cautioned that, while no doubt the Net will one day be the converged pathway for all communications traffic, most of these recent announcements are, alas, little more than positioning statements.

"There's not much real action behind these announcements," says analyst Sam Greenholtz with Telecom Pragmatics, a strategy and consulting shop. The Bells "have to show they are in the market or have plans to be in the market with services."

Ever since the advent of the Internet, there has been a common assumption that new, cheaper technologies will help callers bypass the old-line phone networks and effectively hollow out the Bells' core business.

That scenario creeps closer to reality as cable companies such as Cox (COX Quote) and Cablevision (CVC Quote) roll out Internet calling services to their TV customers. Meanwhile, upstart VoIP outfits such as Vonage have signed up thousands of users to its $35-per-month unlimited calling plans.

Perhaps even more unsettling for the Bells is the rise of outfits like Skype, which offer basic phone software that users can download to make free so-called peer-to-peer calls over the Net. Given the short but brilliant success of music swapper Napster, futurists aren't exactly underestimating the growth potential of calls that require no phone company.